A. Income Tax: Scheme of the Act
1. The scheme of the Act provides for charging income tax for each year of income as follows:
a) in the case of a resident person, the person's income from employment, business or investment for the year of income irrespective of the source of the income; and
(b) in the case of a non-resident person, the person's income from the employment, business or investment for the year of income, but only to the extent that the income has a source in the United Republic as defined in Part II1, section 6.
B. Income Tax on Resident Corporations (National Government)
1. Name of Tax and Levied in Terms of Which (Name, Number and Year)
Income Tax, Income Tax Act, Cap 332, 2004
2. Department Responsible for Administration
Domestic Revenue Department/ Large Taxpayers Department
3. Definition and Classification
"corporation" means any company or body corporate established, incorporated or registered under any law in force in the United Republic or elsewhere, an unincorporated association or other body of persons, a government, a political subdivision of a government, a parastatal organisation, a public international organization and a unit trust but excludes a partnership;
A corporation is a resident corporation for a year of income if
(a) it is incorporated or formed under the laws of the United Republic; or
(b) at any time during the year of income the management and control of the affairs of the corporation are exercised in the United Republic.
4. Basis of Taxation
4.1 Source-based or residence based
Residence based Income tax is imposed to a resident person upon all income of such a person, which accrued worldwide.
4.2 If source, define:
4.2.1 Actual source
N/a
4.2.2 Deemed source
N/A
4.3 If residence, define:
4.3.1 Define resident
A corporation is a resident corporation for a year of income if-
(a) it is incorporated or formed under the laws of the United Republic; or
(b) at any time during the year of income the management and control of the affairs of the corporation are exercised in the United Republic.
4.3.2 Exclusions from the definition of resident:
NONE
4.3.3 Ceasing of residency provided for in the Act
NONE
5. Time Tax is Levied
When income is derived.
6. Included in Tax Base
Incomes accrued or derived from corporation sources worldwide
7. Year of Assessment
A corporate year of assessment coincides with its year of income, which is a calendar year except where the corporation uses a different twelve-month approved by the Commissioner
8. Computation of Taxable Income
8.1 Exemptions
8.1.1 Partial exemptions (amounts exempt irrespective of the identity of the recipient):
The first TShs 150,000/= per annum interest income; the first Tshs 500,000/= per annum rental income.
1. Interest on tax reserve certificate deposits is also exempt (Para 26 of Part I, First Schedule) as well as Income derived from the discounting of Treasury Bills. (Para 30 of Part I, First Schedule).
8.1.2 Absolute exemptions (taxpayers enjoying completed exemption from tax on income):
There are two types of exemptions, statutory and discretionary exemptions.
Statutory exemptions: granted to persons or incomes which are exempted from Income tax as listed in the Act.
Discretionary exemptions; The Act empowers the Minister for Finance to exempt any person or group of persons with income chargeable to tax.
Statutory Exemptions
a) amounts derived by the President of the United Republic or the President of the Revolutionary Government of Zanzibar from salary, duty allowance and entertainment allowance paid or payable to the President from public funds in respect of or by virtue of the office as President;
b) amounts derived by the Government (including Executive Agency established under the Executive Agencies Act, 1997) or any local authority of the United Republic or by the Revolutionary Government of Zanzibar or any local authority of Zanzibar except amounts derived from business activities that are unrelated to the functions of government;
c) amounts derived by any person entitled to privileges under the Diplomatic and Consular Immunities and Privileges Act to the extent provided in that Act or in regulations made under that Act;
d) amounts derived by an individual from employment in the public service of the government of a foreign country provided:
(i) the individual is a resident person solely by reason of performing the employment or is a non-resident person; and
(ii) the amounts are payable from the public funds of the country;
e) foreign source amounts delivered by
(i) an individual who is not a citizen of the United Republic and who is referred to in paragraph (d); or
(ii) a spouse or child of an individual referred to in subparagraph (i) where the spouse is resident in the United Republic solely by reason of accompanying the individual on the employment;
f) amounts derived by
(i) the East Africa Development Bank;
(ii) the Price Stabilization and Agricultural Inputs Trust;
(iii) the Investor Compensation Fund under the Capital Markets Regulatory Authority; and
(iv) The Bank of Tanzania.
g) amounts derived during a year of income by a primary cooperative society
(v) registered under the Co-operative Societies Act;
(vi) solely engaged in activities as a primary cooperative in one of the following fields:
(aa) agricultural activities, including activities related to marketing and distribution;
(bb) construction of houses for members of the cooperative;
(cc) distribution trade for the benefit of the members of the cooperative;
(dd) savings and credit society; and
(vii) whose turnover for the year of income does not exceed Tshs.50,000,000;
h) pensions or gratuities granted in respect of wounds or disabilities caused in war and suffered by the recipients of such pensions or gratuities;
i) a scholarship or education grant payable in respect of tuition or fees for full-time instruction at an educational institution;
j) amounts derived by way of alimony, maintenance or child support under a judicial order or written agreement;
k) amounts derived by way of gift, bequest or inheritance, except as required to be included in calculating income under sections 7(2), 8(2) or 9(2);
l) amounts derived in respect of an asset that is not a business asset, depreciable asset, investment asset or trading stock;
m) amounts derived by way of foreign living allowance by any officer of the Government that are paid from public funds and in respect of performance of the office overseas;
n) amounts earned by non-residents on deposits in Banks registered by the Bank of Tanzania;
o) income derived from investments exempted under the Export Processing Zones Act;
p) income derived from investments exempted under any written laws for the time being in force in Tanzania Zanzibar;
q) rental charges on aircraft lease paid to a non-resident by a person engaged in air transport business;
r) amounts derived by a crop fund established by farmers under a registered farmers cooperative society, union or association for financing crop procurement from its members;
s) gratuity granted to a Member of Parliament at the end of each term; and
t) The fidelity fund established under the Capital Markets and Securities Act.
8.2 Deductions and recoupments
8.2.1 Allowable deductions
Expenditure incurred during the year of income, by the person wholly and exclusively in the production of income from the business or investment. Including
(i) Interest expense
(ii) Trading Stock
(iii) Repair and maintenance expenditure
(iv) Agriculture, research, development and environmental expenditures
(v) Gifts to public and charitable organisations
(vi) Depreciation allowance for depreciable assets
(vii) Losses on realisation of assets and liabilities
(viii) Losses from business
(ix) Capital losses on business assets
(x) Carry forward of losses
(xi) Bad debt
8.2.2 Valuation of inventory/trading stock
The Act does not provide any specific mechanism, but the practice is to use the market value or the cost of the inventory, whichever is lower. (Legal backing – Tanzania Accounting Standards). Valuation method is FIFO
The Act does not allow reserves and provisions except for specific provisions for bad debts approved by the Commissioner.
(i) consumption expenditure incurred by the person
(ii) Expenditure that secures a benefit lasting longer than twelve months; or
(iii) expenditure incurred in respect of natural resource prospecting, exploration and development;
(iv) tax payable under the Income Tax Act;
(v) bribes and expenditure incurred in corrupt practice;
(vi) fines and similar penalties payable to a government or a political subdivision of a government of any country for breach of any law or subsidiary legislation;
(vii) expenditure to the extent to which incurred by a person in deriving exempt amounts or final withholding payments; or
(viii) Distributions by an entity.
The Income Tax Act does not provide for recoupments
8.3 Depreciable regime
8.3.1 Tangibles (movable and immovable assets, for example plant and machinery)
The wear and tear allowance on capital assets depends on the class into which the asset falls
|
Class |
Depreciable assets |
Rate |
|
1 |
Computers and data handling equipment together with peripheral devices, automobiles, buses and minibuses with a seating capacity of less than 30 passengers, goods vehicles with a load capacity of less than 10 tones construction and earth moving equipment |
37.5% declining balance |
|
2 |
Buses with a seating capacity of 30 or more passengers, heavy general purpose or specialized trucks, trailer mounted containers, rail road cars, locomotives and equipment, vessels, barges, tugs, and similar water transportation equipment, aircraft, other self propelling vehicles, plant and machinery (including windmills, electric generators and distribution equipment used in Agriculture, manufacturing or mining operations, specialized public utility plant and equipment, and machinery or other irrigation installations and equipment |
25% Declining balance |
|
3 |
Office furniture, fixtures, and equipment, any asset not included in other class |
12.5% Declining Balance |
|
4 |
Natural resource exploration and production and production rights and assts referred to in subparagraph 3in respect of natural resource prospecting, exploration and development expenditure |
20% Straight Line(SL) |
|
5 |
Building, structures, dams, water reservoirs, fences, and similar work of a permanent nature used in agriculture, livestock farming or fishing farming |
20% SL |
|
6 |
Buildings structures, structures, and similar works of permanent nature other than those mentioned in class 5 |
5% SL |
|
7 |
Intangible assets other than those in class 4 |
1 divided by the useful life of the asset in the pool and rounded down to the nearest half year |
|
8 |
Plant and machinery (including windmills, electric generators and distribution equipment) used in agriculture. |
100% |
8.3.2 Intangibles/incorporeals (for example, copyright, patents, goodwill and other intellectual rights)
N/A
8.4 Treatment of losses
Losses are allowable deductions and are carried forward indefinetely
8.2.5 Recoupments8.2.4 Non-deductible expenses8.2.3 Reserves and provisions
9. Foreign Exchange Losses and Gains
In case of gains, they are considered as normal income and charged at the normal corporation tax rate. Losses are considered allowable deductions; or as a part of the cost of an asset and grated capital allowances
10. Branch Profits Tax
Income derived from Tanzania by a non-resident corporation having a permanent establishment in Tanzania is taxable at the corporate rate of income tax.
11. Group Taxation/Consolidated Returns
No group taxation
12. Presumptive Tax Measures (for example, a minimum tax in the form of a gross asset tax)
Turnover based alternative minimum tax at the rate 0.3% of turnover
13. Rates
Corporate tax rate is 30% for both resident and non-residents.
14. Rebates
None.
15. Withholding Taxes
The following amounts paid to non-residents, not having a permanent establishment in the United Republic are subject to a withholding tax:
a) management fees;
b) professional fees;
c) royalties;
d) rent , premium or like consideration;
e) dividends;
f) interest;
g) pension or retirement annuities;
h) insurance commissions; and
i) technical service fee for mining
The following amounts paid to residents are subject to a withholding tax:
a) dividends;
b) interest;
c) insurance commissions;
d) rent;
e) technical service fee for mining; and
f) amounts paid for carriage of goods by roads
16. Beneficiaries of Revenue
Central Government
C. Income Tax on Individuals (National Government)
1. Name of Tax and Levied in Terms of Which Act (Name, Number and Year
Income Tax, Income Tax Act, Cap 332, 2004
2. Department Responsible for Administration
Domestic Revenue Department
3. Definition and Classification
An individual is a natural person whether male or female and whether married or un married.
4. Time Tax is Levied
When income is derived
5. Basis of Taxation
5.1 Source-based or residence based
Residence based Income tax is imposed to a resident person upon all income of such a person, which accrued worldwide.
5.2 If source, define:
5.2.1 Actual source
N/A
5.2.2 Deemed source
N/A
5.3 If residence,
5.3.1 Define resident
An individual is resident in the United Republic for a year of income if the individual -
(i) has a permanent home in the United Republic and is present in the United Republic during any part of the year of income;
(ii) is present in the United Republic during the year of income for a period or periods amounting in aggregate to 183 days or more;
(iii) is present in the United Republic during the year of income and in each of the two preceding years of income for periods averaging more than 122 days in each such year of income; or
(iv) is an employee or an official of the Government of the United Republic posted abroad during the year of income.
5.3.2 Exclusions from the definition of resident:
N/A
5.3.3 Ceasing of residency provided for in the Act
None.
6. Included in Tax Base
Incomes accrued or derived from all taxable sources worldwide
7. Year of Assessment
A corporate year of assessment coincides with its year of income, which is a calendar year except where the corporation uses a different twelve-month approved by the Commissioner.
8. Computation of Taxable Income
8.1 Exemptions (do not only indicate the heading, but provide a brief explanation)
8.1.1 Partial exemptions (amounts exempt irrespective of the identity of the recipient):
Same as for corporate taxpayers. In addition (Par 1(1) of the First Schedule):
1) That part of the income of the President of the United Republic derived from salary, duty allowance and entertainment allowance paid or payable to him from public funds in respect of or by virtue of his office as President of the United Republic;
2) Management or professional fees, royalty or interest provided that the Minister certifies that it is required to be paid free of tax in the terms of an agreement to which the Government is a party either as principal or guarantor or that it is in the public interest that the income be exempted from tax;
3) Half of the gratutity or commuted pensions gratuity payable to any resident individual;
4) Pensions or gratuities granted in respect of wounds or disabilities caused in war and suffered by the receipients of such pensions or gratuities;
5) That part of the income of any officer of the Government or of the Community accrued in or derived from the United Republic which consists of foreign allowances paid to such office from public funds in respect of his office;
6) The emoluments of any officer of the Desert Locust Survey who is not resident in the United Republic;
7) The emoluments of any person in the public service of the Government of such a country in respect of his office under that Government where such person is resident in the United Republic solely for the purpose of performing the duties of his office where such emoluments are payable from the public funds of such country;
8) The emoluments payable out of foreign sources for duties performed in the United Republic in connection with any technical assistance agreement to which the government, the Community or a parastatal organisation is a party, to:-
any non-resident person; or
to any person who is resident solely for the purposes of performing such duties provided that the agreement provides for the exemption of the emoluments and the Minister has, where the Government or the Community is not a party to the agreement, approved such provision by a writing under his hand.
8.1.2 Absolute exemptions (taxpayers enjoying completed exemption from tax on income)
Same as for bodies corporate.
8.2 Deductions and recoupments
8.2.1 Allowable deductions
Same as for bodies corporate
8.2.2 Valuation of inventory/trading stock
The Act does not provide any mechanism for that, but practically the valuation is done basing on the market value or the cost of the inventory, therefore the reported inventory value is either the cost price or market value, whichever is lower. (Legal backing ; Tanzania Accounting Standards)
8.2.3 Reserves and provisions
The Act does not allow reserves and provisions, except specific provisions for bad debts as approved by the Commissioner.
8.2.4 Non-deductible expenses
Same as for bodies corporate
8.2.5 Recoupments
The Income Tax Act does not provide for this.
8.3 Depreciable regime
8.3.1 Tangibles (movable and immovable assets, for example plant and machinery)
The Income Tax Act does not provide for this.
8.3.2 Intangibles/incorporeals (for example, copyright, patents, goodwill and other intellectual rights)
N/A
8.4 Treatment of losses
Same as for Corporate bodies
9. Foreign Exchange Losses and Gains
Same as per Corporate bodies
10. Rates
Taxable Income Rates
|
SN |
MONTHLY TAXABLE INCOME |
TAX RATE |
|
1 |
Where income does not exceed Tshs. 135,000/= |
NIL |
|
2 |
Where total income exceeds Tshs. 135,000/= but less than Tshs. 360,000/= |
14% of the amount in excess of Tshs. 135,000/= |
|
3 |
Where total income exceeds Tshs. 360,000/= but less than Tshs. 540,000/= |
Tshs. 31,500/= plus 20% of the amount in excess of Tshs 360,000/= |
|
4 |
Where total income exceeds Tshs. 540,000/= but less than Tshs. 720,000/= |
Tshs. 67,500/= plus 25% of the amount in excess of Tshs 540,000/= |
|
5 |
Where total income exceeds Tshs. 720,000/= |
Tshs. 112,500/=plus 30% of the amount in excess of Tshs 720 ,000/= |
The Individual Presumptive Tax Assessment
|
TURN OVER |
TAX PAYABLE WHERE INCOMPLETE RECORDS ARE KEPT |
TAX PAYABLE WHERE INCOMPLETE ARE KEPT |
|
(i) Where turnover does not exceed sh. 3,000,000/- |
Sh. 35,000/- |
1.1% of the annual turnover. |
|
(ii) Where turnover is between 3,000,000/- and 7,000,000/- |
Sh. 95,000/- |
Sh. 33,000/- plus 1.3% of the turnover in excess of sh. 3,000,000/- |
|
(iii) Where turnover is between 7,000,000/- and Sh. 14,000,000/- |
Sh. 291,000/- |
Shs. 85,000/- pus 2.5% of the turnover in excess of sh. 7,000,000/- |
|
(iv) Where turnover is between shs. 14,000,000/- and shs 20,000,000/- |
Sh. 520,000/- |
Sh. 260,000/- plus 3.3% of the turnover in excess of sh. 14,000,000/- |
11. Rebates/Tax Threshold
The threshold for personal income tax purposes is Shs 100,000/= per month
12. Fringe Benefit Taxes (Benefits Flowing from an Employer-Employee or an Office Relationship)
Fringe benefits are taxable at an Individual Rates on the hands of the recipient, i.e. the employee.
13. Allowances
Allowances are taxable at an Individual Rates on the hands of the recipient, i.e. the employee.
14. Treatment of Pension, Provident or Retirement Annuity Fund Income
a commuted pension from an approved retirement fund is included in calculating the individual's income
15. Treatment of Professional Income
No special treatment, professional income form part of total income.
16. Treatment of Investment Income
No special treatment, investment income form part of total income
17. Withholding Taxes
Same as corporate bodies
18. Beneficiary of Revenue
The Central Government
D. Income Tax on Non-Residents (National Government)
1. Name of Tax and Levied in Terms of Which Act (Name, Number and Year
Income Tax, Income Tax Act, Cap 332, 2004
2. Department Responsible for Administration
Domestic Revenue Department
3. Included in Tax Base
Income accrued or derived from a source within the United Republic of Tanzania.
4. If Sourced-Based, Define (If Not Already Done)
4.1 Actual source
4.2 Deemed source:
5. Rates
The total income of a non-resident individual for a year of income shall taxed at the rate of 20 percent
Corporations are chargeable at resident Corporate rate for both resident and non-resident is 30%.
6. Beneficiary of Revenue
Central Government
E. Income Tax: Treatment of Dividends, Interest, Royalties and Fees
Taxes on these items are deducted and remitted to the the Commissioner for Income Tax at prescribed withholding taxes rates upon payment.
1. Dividends
Any payment made by a resident corporation to shareholders in relation to any profits whether earned before or during the winding up of the corporation or any debentures or redeemable preference shares issued by such corporation to any of its shareholders; is subject to a withholding tax of 10% or 5% if listed with the Dar es Salaam Stock Exchange
2. Interest
Interest payable in any manner in respect of any loan, deposit, debt, claim or other right or obligation is subject to a withholding tax of 10%.
3. Royalties
Any payment made as a consideration for the use of or the right to use:
a) any copyright of literacy, artistic or scientific work;
b) any cinematograph film;
c) any patent, trademark, design or model, plan, formula or process;
d) any industrial, commercial or scientific equipment are all subject to a withholding tax of 10%.
4. Fees
Management or professional fee paid in monetary terms or given in kind to any non-resident person as consideration for any services of a managerial, technical or professional nature paid or given to any non-resident person is subject to a withholding tax of 15%.
5. Rents
Any amount paid by a resident person or a person having a permanent establishment in the United Republic to any other person in respect of the use of any property; is subject to a withholding tax of 10% and 15 for non residents
Nb for residential house applicable only when the amount paid exceed Shs 500,000 per annum
F. Income Tax: Specific Industries
1. Mining Tax
In Tanzania incomes from all sources or from all types of industries are treated in similar manner, and are governed by the same Act. The only difference is in ascertainment of total assessable income due to some differences in allowable deductions to each separate industry
2. Insurance Business
Special case for determination of the gains or profits from Insurance businesses:
(a) there shall be included, together with any other amounts to be included under other provisions of the income actt -
(i) premiums derived during the year of income by the person as insurer, including as re-insurer, in conducting the business; and
(ii) proceeds derived during the year of income by the person under any contract of re- insurance in respect of proceeds referred to in paragraph (b)(i); and
(b) there shall be deducted, together with any other amounts deductible under other provisions of this Act
(i) proceeds incurred during the year of income by the person as insurer, including as re-insurer, in conducting the business; and
(ii) premiums incurred during the year of income by the person under any contract of re-insurance in respect of proceeds referred to in subparagraph (i).
3. Farming
special Case for Determination of Inventory of taxpayers conducting farming:
Information to be revealed in the return of income:
(i) Value of stock at the beginning and the year-end at beginning, the stock held at the last date of the last year for a going on business. And the value of stock acquired prior to commencement of farming.
(ii) The value of stock deemed to be the purchase price or where the stock was acquired otherwise than purchases such price as the Commissioner may determine to be the current market price.
(iii) The commencement of farming, the value of livestock held by any farmer, other than a company, shall be reduced by such amount as reasonable having regard to the risk of mortality of such livestock.
(iv) Where any person discontinues farming operations during any year of income but does not dispose of his stock. The value of stock held at the end of the year of income shall be included in his income for that year of income.
(v) For the purpose of this section, any livestock which is the subject of any agreement between the owner and any other person whereby the owner retains the right of ownership of such livestock or of any progeny thereof, shall be deemed to be livestock held and not disposed of by such owner.
(vi) Where any farmer makes a donation of any stock to any other person there shall be induced in the gross income of that farmer for the year of income an amount equal to the price, which the livestock could fetch in open current market.
Stock means livestock and produce, and crops which has been harvested
4. Ships and Aircraft Owners
No special treatment for Residents.
For non-residents: The income earned from a business transaction in the United Republic by a non-resident person that carries on the business of ship owner, charter or air transport operator and any ship or charter owned by him/her that calls at any port or airport in the United Republic, is taxable at a percent determined by the Commissioner.
5. Other
None
G. Income Tax: Administrative Procedures (National Government)
1. Payment Periods
Payment Periods
a) Provisional tax Payment is made three months after the commencement of business. The first instalment is due on the date of filing the provisional returns that is within three months of the beginning of the year of income, and the subsequent instalments are payable after every three months of the start of the year.
b) Final returns and payment of tax is within six months from the end of the accounting period;
c) In any other assessments, tax is payable within 30 days from the date of service of the assessment.
d) PAYE is paid within 7 days of the month following the month to which payment is made
2. Rulings
2.1 Possibility of advance rulings
None
2.2 Publication of rulings
None
3. Codification of Revenue Practices
None
4. Refunds
1. Where tax credits available to a person for a year of income under sections 87, 88, 90 or 95 exceed the person's income tax payable under section 4(1)(a) and (b) for the year of income or where the Commissioner is otherwise satisfied that a person has paid tax in excess of the person's tax liability, the Commissioner shall
(a) Apply the excess in reduction of any tax due but unpaid by the person under this Act; and
(b) Refund the remainder, if any, to the person within 45 days of the person making an application under subsection (3).
2. Interest paid by a person under section 100 shall be refunded to the person to the extent that the tax to which the interest relates is found not to have been payable.
5. Interest, Charges and Penalties
There are interests charges, penalties and fines on the amount payable are imposed on various offences.
Penalty for failure to maintain documents or file Statement or return of income is 2.5 percent of the difference between the income tax payable by the person for the year of income under section 86 3(1)(a) and (b) and the amount of that income tax that has been paid by the start of the start of the month; or Tshs. 10,000 in the case of an individual or Tshs. 100,000 in the case of a corporation.
Interest for Understating Estimated Tax Payable is subject to compound interest at statutory rate from the date the first instalment of the year of income is payable until due date by which the person must file a return for the year of income.
Interest for failure to pay tax person who fails to pay tax on or before the date on which the tax is payable shall be liable for interest for each month or part of a month (the "period") for which any of the tax is outstanding calculated as the statutory rate, compounded monthly, applied to the amount outstanding at the start of the period
Penalty for making false or misleading statements where the statement or omission is made without reasonable excuse, 50 percent of the underpayment of tax or 100% of that, in the Commissioner's view, may have resulted if the statement or omission is made knowingly or recklessly
A person who knowingly or recklessly aids, abets, counsels or induces another person to commit an offence of a type referred to in Division II shall be liable for a penalty equal to 100 percent of the underpayment of tax that, in the Commissioner's view, may have resulted if the offence had been committed and had gone undetected
Offences of:
1 Failure to Comply with Act: fine between Tshs 25,000and TShs 500,000
2 Failure to Pay Tax: fine between Tshs 25,000 to 500,000 and/or imprisonment up to one year
3 Making False or Misleading Statements: fine between Tshs 50,000 to Tshs 1,000,000 and/or imprisonment up to one year
4 Impeding Tax Administration: fine between Tshs 100,000 to 2,000,000 and/or imprisonment up to two years,
5 Offences by Authorised and Unauthorised Persons: fine not less than Tshs 500,000 and imprisonment between one year and three years,
6 Aiding or Abetting: fine not less than Tshs 500,000 and not more than Shs. 2,000,000 and and imprisonment up to two years,
H. Income Tax: Anti-Avoidance Provisions (National Government)
1. Transfer Pricing Legislation
33.-(1) In any arrangement between persons who are associates, the persons shall quantify, apportion and allocate amounts to be included or deducted in calculating income between the persons as is necessary to reflect the total income or tax payable that would have arisen for them if the arrangement had been conducted at arms length.
(2) Where, in the opinion of the Commissioner, a person has failed to comply with the provisions of subsection (1), the Commissioner may make adjustments consistent with subsection (1) and in doing so the Commissioner may -
(a) re-characterise the source and type of any income, +oss, amount or payment; or
(b) apportion and allocate expenditure, including that referred to in section 71(2) incurred by one person in conducting a business that benefits an associate in conducting a business to the person and the associate
2. Thin Capitalisation Legislation
N/A
3. Controlled Foreign Entities (CFES)
Where at the end of a year of income a trust or corporation is a controlled foreign trust or corporation, the trust or corporation shall be treated as distributing to its members at that time its unallocated income for the year of income according to each member's share.
(2) A member who is treated as receiving a distribution under subsection (1) may deduct the amount treated as distributed in calculating the member's income of a future year of income to the extent to which -
(a) the amount has not previously been deducted under this subsection; and
(b) distributions received by the member during the year of income exceed the member's share of the trust or corporation's attributable income for the year of income
(3) To the extent that all dividends distributed by a controlled foreign corporation during a year of income, do not exceed the corporation's attributable income
(4) At the time an amount is treated as distributed by a
Controlled foreign corporation to an associated, the shareholder shall be allocated any income tax under this Act or foreign income tax paid or treated as paid by the corporation with respect to the amount.
(5) A shareholder is treated as having paid the tax allocated to the shareholder
4. Provide a Brief Discussion of General Anti-Avoidance Provisions (Both under common and statutory law)
Section 35 grants power to the Commissioner to make necessary adjustments to prevent the avoidance or reduction of tax liability.
5. Transactions Between Connected Persons
1 Individual who transfers an asset to a spouse or former spouse is treated as deriving an amount in respect of the realisation equal to the net cost of the asset immediately before the realisation; and the spouse or former spouse is treated as incurring expenditure of the amount
2 A person who realises an asset by way of transfer of ownership of the asset to an associate of the person or by way of transfer to any other person by way of gift is be treated as deriving an amount in respect of the realisation equal to the greater of the market value of the asset or the net cost of the asset immediately before the realisation; and the person who acquires ownership of the asset shall be treated as incurring expenditure of the amount
I. Capital Gains Tax on Corporations (National Government)
1. Name of Tax and Levied in Terms of Which Act (Name, Number and Year
Capital Gains Tax, Income Tax Act, Cap 332, 2004
2. Department Responsible for Administration
Domestic Revenue /Large Taxpayers
3. Basis of Taxation (Source-based or residence-based)
The same rate of tax is 30% for resident and non-resident corporate bodies.
Capital Gains Tax is charged to any person who sells any interest held by him in any premises or sells any financial assets owned by him in the United Republic, the difference between:
a) the value of consideration for when such interest or such financial asset is sold: and
b) so much of the adjusted cost to such person of such interest or financial asset as has been claimed as deduction in respect of the Capital Expenditure to such interest or such financial asset
4. Time When Tax is Levied
Once the value under consideration for which such interest or financial asset is determined, specifically within 30 days
5. Included in Tax Base
All movable and immovable assets such as developed land and financial assets (intangible assets) such as shares and debentures
6. Exemptions/Exclusions
(i) Dar es Salaam Stock Exchange listed shares held by non resident if shareholding of 25% or less
(ii) Shares held by resident company running another company with share holding of 25% or more
7. Allowable Deducations
(a) The cost of acquisition of the interest
(b) The expenditure incurred on any improvement to the asset
(c) Expenditure incurred wholly and exclusively in connection with the realisation, such as stamp duty, registration charges, legal fees, brokerage etc.
8. Non-Deductible Expenses
Business Losses
9. Roll-Overs
N/A
10. Treatment of Losses
Capital losses cannot be deducted against taxable income
11. Rates
The applicable rate for corporations is 30%
12. Rebates
N/A
13. Tax Period
Tax is payable within 30 days from the date of the assessment
14. Withholding Taxes
N/A
15. Beneficiary of Revenue
Central Government.
J. Capital Gains Tax on Individuals (National Government)
1. Name of Tax and Levied in Terms of Which Levied (Name, Number and Year)
Capital Gains Tax, Income Tax Act, Cap 332, 2004
2. Department Responsible for Administration
Domestic Revenue Department
3. Basis of Taxation (Source-based or residence-based)
Same as for bodies corporate.
4. Time When Tax is Levied
Once the value under consideration for which such interest or financial asset is determined, specifically within 30 days
5. Included in Tax Base
All movable and immovable assets such as developed land and financial assets (intangible assets) such as shares and debantures.
6. Exemptions
(a) Private residence gains of TShs. 15 million or less
(b) Agricultural land of market value less than Tshs.10 million
(c) Shares
- Dar es Salaam Stock Exchange listed shares held by non resident if shareholding of 25% or less
- Shares held by resident company running another company with share holding of 25% or more
7. Allowable Deducations
(b) The expenditure incurred on any improvement to the asset
(c) Expenditure incurred wholly and exclusively in connection with the realisation, such as stamp duty, registration charges, legal fees, brokerage etc.
8. Non-Deductible Expenses
Business Losses
9. Treatment of Losses
Same as for Bodies Corporate.
10. Rates
Residents at 10%, non residents at 20%
11. Rebates/Annual Deduction
N/A
12. Tax Period
Same as for Bodies Corporate.
13. Withholding Taxes
N/A
14. Beneficiary of Revenue
Central Government.
K. Special Taxes (Other Than Income Tax) on Certain Industries/Types of Income
1. Name of Tax and Levied in Terms of Which Act (Name, Number and Year
1. Skills and Development Levy, Vocational Education and Training, Act, No 1 of 1994 and,
2. Gaming Tax, Pools and Lotteries Act, No. 23 of 1967
2. Department Responsible for Administration
Domestic Revenue /Large Taxpayers
3. Taxpayer
1. For Skills and Development, Vocational Education and Training, taxpayer is any employer who have four or more employees and,
2. For Gaming Tax, Pools and Lotteries, taxpayer is any Lottery Industry
4. Included in Tax Base
1. For Skills and Development Levy:
All employers who have four or more employees except government departments and or any public Instistitution which is not a profit making and wholly financed by the government;
Ministerial discretion, Diplomatic Missions, The United Nations and all its organizations, International and other foreign institutions dealing with aid or technical assistance, training and educational institutions, Institutions of religion whose Employees are solely employed to administer places of worship, to give religious instructions or generally to minister religion, Charitable Organizations and a Local Government Authority.
2. For Lottery Industry; Every receipt of a pool bet, section 12(1), Gaming tax on the games presented in the table below:
Type of games: Casinos, Slot Machines and Private Lotteries
5. Tax Rate
- For Skills and Development Levy; 6% of the total gross monthly emoluments payable by the employer to all his employees in respect of that month
- Casinos at 13 per cent of gross receipts, slot machines TShs 16,000 and private lotteries 10 per cent
6. Beneficiary of Revenue
1) For Skills and Development Levy; Treasury, Vocational Education and Training Centre, and Tanzania Education Authority
2) For Lottery Industry; Beneficiaries are Treasury and National Lottery
L. Taxation of Capital
1. Name of Tax and Levied in Terms of Which Act (Name, Number and Year
Amounts derived by way of gift, bequest or inheritance, except as required to be included in calculating income under sections 7(2), 8(2) or 9(2);
2. Department Responsible for Administration
N/A
3. Taxpayer
N/A
4. Included in Tax Base
N/A
5. Tax Rate
N/A
6. Beneficiary of Revenue
N/A
M. Donations Tax (National Government)
1. Name of Tax and Levied in Terms of Which Act (Name, Number and Year
N/A
2. Department Responsible for Administration
N/A
3. Taxpayer
N/A
4. Included in Tax Base
N/A
5. Tax Rate
N/A
6. Beneficiary of Revenue
N/A
N. Other (National Government) (National Government)
1. Name of Tax and Levied in Terms of Which Act (Name, Number and Year
1. Skills and Development Levy, Vocational Education and Training, Act, No 1 of 1994 and,
2. Gaming Tax, Pools and Lotteries Act, No. 23 of 1967.
2. Department Responsible for Administration
Income Tax Department
3. Taxpayer
1. For Skills and Development, Vocational Education and Training, taxpayer is any employer who have four or more employees and,
2. For Gaming Tax, Pools and Lotteries, taxpayer is any Lottery Industry
4. Included in Tax Base
1. For Skills and Development Levy:
- All employers who have four or more employees except government departments and or any public Instistitution which is not a profit making and wholly financed by the government;
- Ministerial discretion, Diplomatic Missions, The United Nations and all its organizations, International and other foreign institutions dealing with aid or technical assistance, training and educational institutions, Institutions of religion whose Employees are solely employed to administer places of worship, to give religious instructions or generally to minister religion, Charitable Organizations an a Local Government Authority.
2. For Lottery Industry; Every receipt of a pool bet, section 12(1), Gaming tax on the games presented in the table below:
Type of games:
Cassino (Dar es Salaam)
Casino (Regions)
Slot Machines
Private Lotteries
5. Tax Rate
1) For Skills and Development Levy; 6% of the total gross monthly emoluments payable by the employer to all his employees in rspect of that month.
2) For Lottery Industry; rates games presented in the table below
Type of game Gaming Tax/Rate
Casino (Dar es Salaam) TSh.400,000/= per table per month
Casino (Dar es Salaam) TSh.60,000/= per machine per month
Casino (Regions) TSh.20,000/= per table per month
Casino (Regions) TSh.30,000/= per machine per month
Slot Mahines TSh.16,000/= per machine per month
Private Lotteries 10% of gross sales
6. Beneficiary of Revenue
1) For Skills and Development Levy; 2/3 goes to Treasury and 1/3 goes to Vacational Education and Training Centre
2) For Lottery Industry; Beneficiaries are Treasury and National Lottery.